“Wild West” Energy Drink Market Attracts Big Players, Bigger Claims
This article was originally published in The Tan Sheet
Executive Summary
Even with major beverage companies acquiring stakes in the rapidly growing energy drink market, unsubstantiated claims used by smaller firms to differentiate their products likely will continue as a dominant feature of the competition
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Even with major beverage companies acquiring stakes in the rapidly growing energy drink market, unsubstantiated claims used by smaller firms to differentiate their products likely will continue as a dominant feature of the competition. The latest energy-drink activity by a large beverage operation is the Dr Pepper Snapple Group's recent purchase of an equity stake in Hydrive Energy. Rye, N.Y.-based Hydrive has tried to cultivate a "friendlier" image for its nutritionally enhanced energy drinks, compared to brands promoting ingredients that may confuse consumers, according to Hydrive CEO Brian O'Byrne. Plano, Texas-based DPS launched its own Venom energy drinks in June, but has no product in the top 20 U.S. energy drink sales for the 52-week period ending July 13, according to market research firm Information Resources, Inc. (see chart: " 1 Energy Drinks Flex Their Popularity "). Prior to its minority stake purchase, DPS had a distribution agreement with Hydrive, helping it reach about 7,000 U.S. accounts, according to a July 25 release. O'Byrne said combining with DPS made sense organizationally for Hydrive, adding that "it gives us access to a route-to-market, and gives them a brand that really doesn't compete within their current range of products." While DPS has touted the "hard-core ingredients" in its Venom beverages, including caffeine, l-carnitine and guarana, O'Byrne said Hydrive's products aim for more health-conscious consumers with added B vitamins and product packaging with less intense colors and graphics. Elsewhere in the industry, Las Vegas-based Marshall Holdings International recently announced its purchase of Vitality Beverage, maker of the Socko diet energy drink (see item, In Brief). Trouble With Claims O'Byrne said he supports ingredient transparency and responsibility in the energy drink market. He called Cocaine , the product briefly marketed by Redux Beverages before it was recalled following warnings from FDA, a "ridiculous" case (2 (Also see "Censoring Cocaine Will Cost Redux, But Change Might Open New Markets" - Pink Sheet, 14 May, 2007.), p. 13). However, David Schardt, a senior nutritionist with the Center for Science in the Public Interest, said Hydrive's marketing is marked by the same lack of substantiated claims as other brands. Specifically, Hydrive links certain additives with health functions, such as the claim that maca root "acts as a medicine that enhances strength and endurance," and says on its Web site that the lower sugar and caffeine content in its drinks "creates less 'spiking' and no jitters." Schardt said there seemed to be a "recurring theme" among energy drink marketers that various products could provide a smooth, sustained level of energy, despite no substantiating data linked to the product. O'Byrne said the stated ingredient functions were "just general knowledge more than anything else." Market Free-For-All With products such as Hydrive sold as dietary supplements, Shardt called the energy drink sector a "wild west marketplace out there that FDA is not supervising, and just letting companies make all these wild claims" for "miscellaneous ingredients." While O'Byrne said a large company like DPS would be less likely to make extreme energy drink claims, Schardt noted the need for mainstream firms to stay competitive with edgier upstarts. The result has been Coca-Cola, with its Full Throttle brand, and PepsiCo, with Amp , launching "things that they wouldn't have thought of doing 10 years ago," according to Schardt. Schardt said he expects FDA enforcement on energy drink claims to remain lax, as he does not expect changes to the Dietary Supplement Health and Education Act. However, in July the National Advertising Division of the Council of Better Business Bureaus recommended that Vital Pharmaceuticals change the marketing for its Redline Princess women's energy drink, due to unsupported product performance claims (3 (Also see "Redline Princess Claims Must Be Backed By Product-Specific Studies – NAD" - Pink Sheet, 21 Jul, 2008.), p. 15). - Dan Schiff ([email protected]) |